Business in Brief: Dollar Surges, Euro Skids After Fed Raises Interest Rates

Strauss says TPG wants to sell its stake in their coffee joint venture | Electra Consumer reaches agreement to sell Ace, Office Depot chains | Shares end mixed, bonds tumble in wake of U.S. rate hike

A currency exchange kiosk.
Moti Kimche

Dollar surges, euro skids after Fed raises interest rates

The dollar surged higher against the shekel and the euro dropped on Thursday after the U.S. Federal Reserve raised interest rates and hinted that they could rise faster in 2017 than investors had been anticipating. The dollar strengthened nearly 1.1% to a Bank of Israel rate of 3.8430 shekels and had gained more in late trading to 3.8523. The euro, which skidded in global currency markets, lost nearly 1% against the shekel to 4.0084 to its lowest since January 2002. In late trading it was 4.0064. Lior Faust, manager of the foreign currency desk at Leumi Capital Markets, said the strong reaction was mainly due to Fed Chairman Janet Yellen’s comments on Wednesday, in which she pointedly failed to hinge future rate hikes on the U.S. economy’s performance going forward. “The dove has turned into a hawk,” he said. “The question of whether it’s a real change or a cosmetic one will determine the direction of the dollar next year.” (Guy Erez)

Strauss says TPG wants to sell its stake in their coffee joint venture

Strauss Group said on Thursday that the U.S. private equity firm TPG Capital Management was looking to sell its 25% stake in their Strauss Coffee joint venture. Strauss said it hadn’t decided how to respond, but since the fund holds a minority stake and the shares aren’t publicly traded Strauss itself is the most likely candidate to buy it, if the two sides can agree on a price. Strauss didn’t reveal why TPG wants to bail out but mostly likely it is due to the failure to take the joint venture public in the United States three years ago. TPG bought its stake from Strauss in 2008 for $293 million, but relations between the two sides frayed five years later in a dispute over the planned initial public offering and whether to oust Strauss Café’s CEO. The economic crisis in Brazil, Strauss Coffee’s main market, put an end to IPO plans. Strauss shares ended down 0.8% at 59 shekels ($15.31). (Yoram Gabison)

Electra Consumer reaches agreement to sell Ace, Office Depot chains

Electra Consumer Products said on Thursday it had agreed on terms to sell its Ace do-it-yourself and Office Depot retail chains to the Kedma Capital private equity fund in a deal valuing the businesses at 190 million shekels ($49.3 million). The agreement calls for Kedma to pay 100 million shekels in cash, another 45 million in two payments over the next 18 months and assume 45 million shekels in short-term debt held by Ace. Electra Consumer, a unit of the Elco Group, said it expected to post a 95 million-shekel gain from sale. Electra Consumer bought an indebted and failing Ace almost five years ago in a court-ordered auction for 129 million shekels and quickly turned the retailer around. But under its new CEO, Zeev Kalimi, Electra Consumer has been focusing on its core businesses in air conditioning and its Shekem Electric retail chain. Electric Consumer shares finished down 0.7% at 51.21 shekels. (Uri Tomer)

Shares end mixed, bonds tumble in wake of U.S. rate hike

Tel Aviv shares ended mixed on Thursday, but bond prices and real estate shares dropped sharply on the U.S. interest rate hike announced overnight. The government’s 10-year shekel bond dropped 0.5% to raise its yield to 2.275% and the Tel-Bond 20 index lost 0.2% to 321.45 points. Property stocks’ move lower was led by a 3.1% drop for Azrieli to 165.40 shekels ($42.92) and a 2.9% drop to 33.90 for Gazit Globe. The blue chip TA-25 index ended up 0.06% to 1,455.92, while the TA-100 ended virtually unchanged at 1,271.43, on turnover of 1.485 billion shekels. Paz ended 3.9% lower at 598.50 after controlling shareholders Zadik Bino and partners sold 800 million shekels of shares at 590 shekels each. The sale represented between 12% and 13% of equity and reduced their stake to less than 30%. Among gainers, Teva Pharmaceuticals rose 1.3% in heavy trading to 142.40 and Nice Systems added 2.1% to 257.80. (Guy Erez)